Investor's Loan Guide by Graham W. Parham

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Using a Power of Attorney A power of attorney is a legal document that gives someone else legal authority to enter into transactions and sign documents on your behalf. The other person's signature is legally binding to the same extent as if you had signed the document. There are legal requirements for using a POA for real estate transactions. The purpose of the POA is to allow someone else, called the attorney or attorney in fact, to fulfill the administrative role of entering into agreements for you so that you do not have to sign every document. Your attorney, in fact, is essentially a legal replica of you. They can bind you to legal contracts and sign your name for real estate transaction. POAs have been used for years to help buyers and sellers when they have a difficult time showing up at the closing table. There are many reasons to use a POA, but I must warn you, if you do not trust the person assigned a power of attorney, it could get you into trouble legally. Before the mortgage meltdown, many fraudulent investors would use these instruments to wrongfully conduct a real estate transaction. The most common one was “Straw Buying.” Scam artists who wanted to cheat the system would pay money to people to allow them to use their credit to get a mortgage loan. Most of the scams where the individuals who elected to have their credit used were foreign nationals, people too ignorant to determine that they were breaking the law. These people would give power of attorney to the scammer to completely conduct the transaction from beginning to the end. Once the loan closed, they would collect the rents, but never paid the mortgage, which resulted in a foreclosure. The mortgage industry frowns on POA’s, especially if it is for an investment property transaction. Most lenders will still do them, but are very cautious about who they will allow as a POA. Relatives are the most commonly accepted 65
POA. Many lenders will require proof of relationship. Most POA documents will have to be approved by the lender legal staff to make sure they are comfortable with the language. HUD Closings Many agents, as well as investors, don’t realize that most HUD appointed Title Companies will not allow closing documents to be overnighted to a buyer for closing. Non-seasoned agents are more focused on getting the contract accepted from HUD for that out of town investor; they neglect to tell them they have to be at the closing table to close. I would assume less than 2% of out of state buyers will spend the money to travel to the closing. If the borrower does not have a relative or an approved POA in that market to sign, then getting the loan closed can be a problem. I have personally been involved in over 300 HUD closings, and this has been a problem more times than I can count. POA approvals can also be a challenge if you have never had one prepared. Most POAs are prepared by a legal staff at the title company or the borrower and chooses to have it prepared by the family attorney. Either way is fine as long as they know what type of verbiage HUD requires of the POA. Hands down, HUD is the pickiest on what they will approve. I have never seen a POA get approved the first time out from a family attorney. Many HUD appointed title companies will prepare one for you but will charge you $175 - $400 to do so. Notarizing Power of Attorneys All powers of attorney are legal instruments that are required to be notarized for the authenticity of the signers. Keep in mind when presenting your power of attorney to a title company or a lender their legal staff will not even look at the document until it is officially notarized. If the instrument is not prepared correctly in accordance to the title company or the lender, the borrower is required to have the corrections made and re-notarized. 66
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INVESTORS LOAN GUIDE A Beginner’s
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Table of Contents INTRODUCTION ....
Page 6 and 7:
WHY IS MORTGAGE LENDING SO DIFFICUL
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o Legal Benefits ..................
Page 10 and 11:
Frank bill was introduced with even
Page 12 and 13:
What Types of Loans are Available f
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focused on the long-term loans, whe
Page 16 and 17: secure direct fax, or upload all th
Page 18 and 19: Assets to Close • 2 months statem
Page 20 and 21: What would cause that? An incorrect
Page 22 and 23: Once our setup team has completed t
Page 24 and 25: Using Funds from a newly formed LLC
Page 26 and 27: 1. If a borrower has 2-4 financed p
Page 28 and 29: financial reserves subject to the m
Page 30 and 31: Your Credit Score Before lenders de
Page 32 and 33: This part of the mortgage loan proc
Page 34 and 35: • Qualifying you for certain term
Page 36 and 37: include: • Errors or omissions in
Page 38 and 39: to help ensure the client receives
Page 40 and 41: available via phone at the time of
Page 42 and 43: Why is Mortgage Lending so Difficul
Page 44 and 45: ackward and forwards, and I still c
Page 46 and 47: many of the lenders will put the br
Page 48 and 49: What about Capital Expenditures? Ca
Page 50 and 51: What does that mean to the borrower
Page 52 and 53: Price $150,000.00 $150,000.00 Diffe
Page 54 and 55: Real estate investors who are buyin
Page 56 and 57: Examples of Renovations that Qualif
Page 58 and 59: Understanding a 1031 Tax Exchange A
Page 60 and 61: Finally, certain types of property
Page 62 and 63: Mortgage Boot The second fundamenta
Page 64 and 65: Costs specifically related to the f
Page 68 and 69: If you are living abroad and trying
Page 70 and 71: Why Put Your Rental Properties into
Page 72 and 73: eside in even if your LLC is set up
Page 74 and 75: What are Turnkey Properties? In sim
Page 76 and 77: market conditions, disposing of uns
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Investor's Loan Guide by Graham W. Parham